2014 (6) TMI 676 - HC - Companies Law

Maintainability of appeal - whether the CLB was right in law in holding that the appellant had no locus standi under Section 237(b) of the Act - Held that - It may be open to the CLB to form such an opinion while examining any matter before it, there is no prohibition placed upon it from forming an opinion on the basis of material which is brought to its notice by any person who may not be a member or creditor of the company or in any way connected to the company. Under Section 235(2) the application for investigation can be moved by not less than 200 members or by members holding not less than 1/10th of the total voting power. Section 237(b) does not place any such restriction. There may be several persons other than members of the company who may be in the know of the violations and irregularities or fraudulent practices perpetrated by a company. Those persons, driven by public spirit or public interest, may bring the relevant facts and the material with all the supporting evidence to the notice of the CLB to assist the CLB to suo motu form an opinion as to the existence of circumstances described in the three sub-clauses of clause (b). - decided against appellants.

Summary

Issues Involved:
1. Locus standi of the appellant under Section 237(b) of the Companies Act, 1956.
2. Maintainability of an appeal against administrative orders under Section 10F of the Companies Act, 1956.
3. Examination of the merits of the appellant's petition by the Company Law Board (CLB).

Detailed Analysis:

1. Locus Standi of the Appellant under Section 237(b) of the Companies Act, 1956:
The primary issue in this case was whether the appellant had the locus standi to invoke the suo motu jurisdiction of the CLB under Section 237(b) of the Companies Act, 1956. The appellant argued that Section 237(b) does not specify at whose instance the CLB can form an opinion regarding the existence of circumstances described in the sub-clauses. He contended that any person, regardless of their connection to the company, could bring relevant facts and material to the notice of the CLB to assist in forming an opinion. However, the court referred to the precedent set in V.V. Purie v. E.M.C. Steel Ltd. [1980] 50 Comp. Cas. 127 (Delhi), which held that the section should not be interpreted to allow any person without a direct interest in the company to seek an investigation into its affairs. The court concluded that the appellant did not have the locus standi to invoke Section 237(b) as he was neither a member nor a creditor of the company and had no legal injury or direct interest in the company's affairs.

2. Maintainability of an Appeal Against Administrative Orders under Section 10F of the Companies Act, 1956:
The court examined whether the impugned orders of the CLB, even if considered administrative, were appealable under Section 10F. The court noted that Section 10F allows appeals against any decision or order of the CLB on any question of law. It concluded that the language of Section 10F is broad enough to cover administrative decisions. The court cited judgments from the Supreme Court in Barium Chemicals Ltd. v. CLB AIR 1967 SC 295 and Rohtas Industries Ltd. v. S.D. Agarwal AIR 1969 SC 707, which supported the view that forming an opinion under Section 237(b) involves judicial consideration and is therefore appealable.

3. Examination of the Merits of the Appellant's Petition by the CLB:
The appellant had filed a petition alleging illegal acts and violations by M/s. Connaught Plaza Restaurant Pvt. Ltd. and M/s. McDonald India Pvt. Ltd. The CLB dismissed the petition, stating that the appellant was not qualified under Section 237(b) and that the allegations were either not covered by the section or were unsubstantiated. The appellant sought a recall of the order and deletion of personal remarks made against him, which the CLB accepted, but it reiterated its view on the lack of locus standi and dismissed the petition on merits. The court upheld the CLB's orders, agreeing that the appellant did not have the locus standi and that the CLB had rightly dismissed the petition as misconceived.

Conclusion:
The court upheld the orders of the CLB dated 18.12.2013 and 30.12.2013, dismissing the appeal and all connected applications. The court emphasized that Section 237(b) should not be interpreted to allow any person without a direct interest in the company to seek an investigation into its affairs. The appeal was dismissed with no order as to costs.